Movement Along the Supply Curve - A-Level Economics
Movement Along the Supply Curve
Introduction to Supply
Supply is the quantity of a good or service that producers are willing to sell at a given price. The supply curve illustrates how much firms in a market will supply at any given price.
Firms are organisations which bring together factors of production in order to produce output.
Firms operate in competitive markets, which are markets in which individual firms cannot influence the general price level of the good or service they are selling, because of competition from other firms.
The law of supply states that there is a positive relationship between quantity supplied and the price of a good or service.
The supply curve is upward sloping because:
- Producers supply more when the price is higher because of increased profits.
- As firms increase quantity supplied in the short run, they have to invest in extra capital (e.g. machinery). To accommodate for this, firms raise prices.
A supply curve is a graphical representation of the relationship between the price of a good and the quantity of that good that producers are willing and able to offer for sale.
Movement along the supply curve refers to a change in the quantity supplied of a good that is caused by a change in the price of that good, while all other factors that affect supply remain constant.
Only changes in the price of the good itself can cause a movement along the supply curve. This is because the quantity supplied of a good is directly proportional to its price.
A movement along the supply curve can cause a shift in market equilibrium. If the quantity supplied increases due to a decrease in price, the new equilibrium price will be lower, and the new equilibrium quantity will be higher. If the quantity supplied decreases due to an increase in price, the new equilibrium price will be higher, and the new equilibrium quantity will be lower.
A movement along the supply curve refers to a change in quantity supplied that is caused by a change in price, while all other factors affecting supply remain constant. In contrast, a shift in the supply curve refers to a change in quantity supplied that is caused by a change in any factor other than price, such as a change in technology or production costs.
Yes, a movement along the supply curve can sometimes cause a shift in the supply curve. This can happen if the change in price causes producers to change their expectations about future prices or other factors affecting supply, which in turn affects their willingness to supply the good at any given price.
Understanding movement along the supply curve is crucial for understanding how changes in price affect the quantity supplied of a good, and how these changes can lead to shifts in market equilibrium. This knowledge is essential for analyzing market outcomes, making business decisions, and predicting market trends in various industries.
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